Please enjoy ARK Disrupt Issue 75. This blog series is based on ARK Brainstorming, a weekly discussion between our CEO, Director of Research, thematic analysts, ARK’s theme developers, thought leaders, and investors. It is designed to present you with the most recent innovation takeaways and to keep you engaged in an ongoing discussion on investing in disruptive innovation. To read the previous issue, click here.

1. Google’s New Tensor Processing Unit Could Be Highly Disruptive

This week GoogleGOOG announced its second generation Tensor Processing Unit (TPU), a processor designed specifically for deep learning. Unlike its first generation, Google TPU 2 can drive both training and inference, the two most important workloads for deep learning. Its first chip was useful only with inference workloads.

Traditionally, training has been an intense computational process, demanding power hungry GPUs costing thousands of dollars. Google’s new TPU does the same work at a fraction of the power and cost.

Source: Google

Google’s new TPU puts the company in direct competition with NVIDIANVDA. Just last week NVIDIA announced Volta, a 120 teraflop GPU designed for deep learning. When configured as a 4-chip board, Google’s TPU 2 does 180 teraflops, a remarkable achievement for a company with little semiconductor expertise.

For now, the TPU 2 works only in Google’s cloud with TensorFlow software. NVIDIA’s GPUs are more widely available and support more software frameworks, perhaps offsetting the TPU 2’s speed advantage in the short term.

With its new TPU, Google’s primary objective could be to become the number one cloud provider. Its Cloud Platform currently is in third place, behind Amazon Web ServicesAMZN and Microsoft AzureMSFT. Because deep learning is one of the most important trends in tech, Google should be able to attract developers to its cloud with the TPU 2, making it the preferred place to deploy artificial intelligence and deep learning applications.

Another TPU application could be in Alphabet Waymo’s self-driving cars. At the Hot Chips conference in 2016, AlphabetGOOGL engineers claimed that they would need a chip capable of 50 teraflops to bring their autonomous vehicles to market. At 45 teraflops, Google’s TPU 2 comes quite close, so don’t be surprised to see it in Waymo’s cars in the not to distant future.

This Friday we attended Ethereal, a conference focused on Ethereum and its broader community. As usual, we were impressed by Ethereum’s evolving intellectual network effect. The conference featured many cryptoassets, with SingularDTV enjoying a particularly strong showing in its quest to build a decentralized entertainment industry atop Ethereum.

Another intriguing project built atop Ethereum is Golem, best described as an attempt to build a worldwide supercomputer. By crowdsourcing compute power from underutilized CPUs and GPUs, Golem potentially could provide compute resources on a scale rivaling the mega-cloud vendors. Given the continued push of digital into the physical world, and the proliferation of compute power in urban areas, Golem’s timing seems right.

Tesla’s TSLA electric vehicles, for example, are powered by GPUs in Nvidia’s DrivePX, described as an “on-board ‘supercomputer’ that can provide full self-driving capability.” When parked, the cars could connect to Golem’s network, enabling a mini-GPU datacenter with operations orchestrated by Golem, as well as a source of income for Tesla owners with no wear and tear on their cars. Such a distributed network could become very powerful, potentially rivaling the hyper-scale cloud vendors.

REMINDER:

Along with William Mougayar, CoinDesk, Coin Center, and others, ARK is helping to organize the Token Summit. This is a first-ever event exploring the economics, regulation and best practices around the issuance and operations of new cryptoassets. You can sign up for this two-day event occurring on May 24 and 25 in NYC here.

3. Another Chinese Lending Company Lists on a US Exchange

China Rapid FinanceXRF, a Chinese consumer lending company, listed on the U.S. stock exchange in April 2017, following the IPO of another Chinese lender, Yirendai YRD, in December 2015. Importantly, China Rapid Finanace is partnered with both Tencent and BaiduBIDU.

China Rapid Finance is focused on a demographic known as the Emerging Middle Class Mobile Active (EMMA) in China. EMMA individuals do not have any credit history, but do have an employment record. As stated in China Rapid Finance’s filings, “according to the People’s Bank of China, as of the end of 2015, there were approximately 500 million individuals with quality employment records but no credit history.” In other words, the size of this demographic is ~53% more than the entire population of the United States (~325 mm). It also has the U.S. equivalent of a 660–720 FICO score.[1] China Rapid Finance’s loans are small, with terms ranging from a few weeks to three years and principal amounts ranging from ~$73 to ~$14,500.[2]

Given a dearth of traditional credit history, China Rapid Finance uses data science to determine which individuals should receive loans. Its information sources include “historical behavioral data, transactional data, social data, [and] search and employment information.”[3] We are looking forward to learning more about the investment opportunities in the nascent Chinese lending market, particularly how mobile technology could change lending practices, risks, and opportunities.

4. Waymo and Lyft Partner With a Focus on Autonomous Taxi Networks

This week Alphabet’s Waymo partnered with Lyft in the autonomous vehicle and ride-sharing spaces. Giving few details on the partnership, a spokesperson for Lyft said “Waymo holds today’s best self-driving technology,” a bit of a blow to one of Lyft’s other partners, GMGM, which owns Cruise Automation. That said, given its $500M stake in Lyft, GM stands to benefit from any success that Lyft and Waymo might enjoy.

While Waymo does seem to have the most advanced technology, Tesla has a clearer path to the commercialization of autonomous taxi networks, thanks to its scale advantage. Compared to Waymo’s hundreds, Tesla has more than a hundred thousand cars on the road collecting data daily, and will ramp up to hundreds of thousands if it hits its goal of 500,000 Model 3 sales next year.

That said, Google is increasing its odds of commercialization success in the autonomous taxi service market with both the Waymo/Lyft partnership and its Phoenix trial of autonomous vehicles. Because Alphabet has shut down many Google X projects, its decision to spin out Waymo and add more to its resource base should reassure doubters.

Based on the recent Waymo/Uber court case, Alphabet clearly considers autonomous cars to be “a massive opportunity”. ARK agrees. In our view, Mobility-as-a-Service could generate $10 trillion in gross revenues by the early 2030s, with autonomous taxi services taking a cut of $2 trillion.

5. Endothelial Cells Could Create Stem Cells

The breakthrough in genome-editing technology, CRISPR, is advancing stem cell research[4]. The combination of CRISPR with stem cells, the earliest manifestations of the ~200 specialized cells in humans, is creating profound therapeutic options for debilitating diseases.

This week alone, a research group demonstrated the ability to convert adult endothelial cells (the inner tissue of blood vessels) back into hematopoietic stem cells, or HSCs, otherwise known as blood stem cells. Since Professor Shinya Yamanaka, a scientist at Kyoto University, first invented this type of induced pluripotent stem cell back in 2006, new research focused on blood cells has enhanced the process. The new approach coaxes mature cells back into a stem cell state in 28 days. The growth factors used to coax the cells into a stem cell state enhance their ability to self-renew and proliferate without additional research input.

In another publication this week, a group of researchers published a study on a novel method of “transfecting” HSCs, the ability to inject biomaterials into HSCs. This advancement is critical to manipulating stem cells given the low 0.1-5% transfection efficiency rate associated with traditional delivery systems. The utility of CRISPR genome-editing is correlated directly with the ability to insert CRISPR materials intra-cellularly into HSCs.

Genome-editing using CRISPR on stem cells may correct genetic diseases at the earliest stages of life. The two advances announced in stem cell-oriented publications this week should be significant for the development of future stem-cell based therapies.

ARK's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.